Bank of England responds to fall in unemployment

Following recent reports that the unemployment rate fell to 7.1% in November, there is growing speculation that the Bank of England may consider changes to current rates of interest.

The Bank’s Monetary Policy Committee (MPC) has previously said it would consider a base rate rise when unemployment reached 7%.

Ian McCafferty, a member of the MPC, said, ‘The 7% unemployment level is only a threshold, not a trigger,’ restating that there is no immediate need and the fact that inflation has returned to the Bank’s 2% target has eased pressure to raise rates.

Interest rates have been at 0.5% since 2009, the lowest level since 1964.

The Office for National Statistics (ONS) said the number of jobless people fell by 167,000 between September and November, with 2.32 million people still unemployed. The ONS also reported that the number of people claiming Jobseeker’s allowance has fallen by 24,000 to 1.25 million.

Changes may not be on the horizon, however. Speaking for private bank Investec, economist Philip Shaw said, ‘Overall we gain the impression that the MPC does not want to raise rates soon and that (perhaps) it will bring its unemployment threshold down’.